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Mr. FINDLEY. Yes, and every other responsible observer, everyone who has commented in print or over the airways that I have heard, has supported this interpretation. Mr. Dow NING. Since the American flag is out of this wheat sale program at present that freight that was added above and beyond the normal export subsidy would go to foreign flags, wouldn't it? Mr. FINDLEY. It could happen, assuming that Continental is not able to sign up U.S.-flag ships on the terms and conditions it is presently insisting upon, and assuming Continental gets a waiver of the requirement of shipping half in U.S. flags. ey may get into a jam and be able to say that they have made a dozen tenders and still can't get ships. For example, they have already made three and they have only signed up I think approximately 100,000 tons. That is only a fifth of what they need. If they can't get the other ships in a reasonable period of time, they can come to the Commerce Department and properly ask for a waiver of this requirement. f they are granted a waiver, they would then be free to bargain for foreign flags, and the question arises in that event who gets the o Can we recapture it as taxpayers, or does it stay in their Ocket p Mr. Dow NING. This morning the Easilona, an Isbrandtsen cargo ship, is loading at Norfolk with êoiás grain. Mr. FINDLEY. Right. - Mosso. Do you know the arrangement under which that ship is sailing : Mr. FINDLEY. It is a U.S.-flag ship. It is one of the very few they have been able to sign up. I have a list of the other flags, but I am sure the names are available to the committee. Mr. Dow NING. Thank you. I think you have contributed a great deal. Mr. FINDLEY. Thank you. Mr. PELLY. Mr. Chairman, may I ask Mr. Findley a question? The CHAIRMAN. Yes. Mr. PELLY. Are you familiar with the distinction that is being made in the use of ships that have traded with Cuba between Public Law 480 and between these private transactions? What I mean is there is a prohibition under the National Security Council against the use of any U.S. Government cargo to go in a ship that has traded with Cuba, but in these private transactions that prohibition does not o Mr. FINDLEY. And that being the case, Mr. Pelly, my information is that several, if not all, of the non-U.S. ships signed up by Continental have touched Cuba in very recent months, and, therefore, would be disqualified from Government business, which is another reason that under the law we would have to regard this as a normal commer. transaction and the ships would not be qualified for a direct freight subsidy. Mr. ‘prox. That is the point I am getting at. In other words, these ships that have traded with Cuba, foreign-flag vessels, are in the market, competitively against American-flag vessels, which they are not under Public Law 480, on Government-financed cargo. Mr. FINDLEY. That is very true.

Mr. Pelly. I think that is very unfortunate.
Mr. FINDLEY. It is indeed.

Mr. PELLY. I think too there is a discrimination, is there not, in the fact that in the business of these grain shipments to Russia under the policy of the shippers there is an attempt being made to utilize the larger bulk carriers, but, as I understand, some of the Russian ports don't have the depth of water in order to allow these ships to unload there, so that if the larger carriers can't carry Public Law 480 cargo and it goes to the smaller vessels,and they are, because of their cheaper rates, being influenced toward carrying the grain to Russia, yet they can't carry that grain. I understand there is a port, Nakhodka, near Vladivostok, where the American-flag carriers, the supercarriers, are excluded from any shipment becanse they have a 34-foot draft as against a 31-foot capacity of those ports.

Mr. FINDLEY. This brings me to another hazard and hardship which is being placed on U.S. flags. They have no practical choice but to accept Continental's terms, but once they get the wheat aboard, they have no recourse against the U.S. Government or Continental. Their recourse is against the Soviet Union, and any complications or lighterage cost, for example, to lighten the load so they can get to the dock, would be upon the shipping firm and it would have to negotiate with the Kremlin on a settlement. They wouldn't really be in a very strong bargaining position.

Mr. PELLY. I understand, however, in Siberia the Russians do not have lighterage service, so that there is a complete ban on some American-flag larger carriers as far as carrying this wheat is concerned.

Mr. FINDLEY. They also face the hazard of higher port fees against U.S. flags. I have been informed by shipping firms that this is about three times as high for U.S. vessels as for foreign flags.

Mr. PELLY. What I think you are saying is that there has been a discrimination against the American-flag service, and it looks like the evidence points in that direction to me.

Mr. FINDLEY. Against certain U.S. flags, very definitely.
Mr. PELLY. Thank you, Mr. Chairman.
Mr. FINDLEY. Thank you, Mr. Chairman.
The CHAIRMAN. Thank you.

Now Mr. Giles, do you have a prepared statement?


Mr. GILES. Mr. Chairman, I do not have a prepared statement. If it is all right with the committee I would like to take about 10 minutes and give the background on this and then try to respond to any questions.

I have, Mr. Chairman, with me on my left Captain Goodman, who is Chief of our Ship Operations Office in the Maritime Administration, and on my right Mr. Robert Ables, who is the General Counsel of the Maritime Administration.

By way of a little bit of confession and avoidance, Mr. Chairman, I would like to say that we have been spending a great deal of time in the last several weeks in connection with the shipping questions and problems on the Russian wheat program.

As of last week we had several conferences with both exporter groups and with ship owner groups. Last Friday I had the indication that perhaps this particular hearing might not be held today, but might have to go over until later in the week, and for that reason I had not had a chance to prepare a statement. If I had prepared one I would have attempted to summarize very briefly the chronological events that occurred on this, and I would like to take about 10 minutes and do that right now.

For my purposes, Mr. Chairman, I want to deal only wih what I would call the domestic developments in regard to shipping. I am not in a position to speak to the international relations or the negotiations with the Soviet representatives—between them and the State Department. I would defer to the State Department on that point.

So I would begin with calling to the attention of the committee the statement of the President which I believe was released to the press on October 9 and which is contained in his communication to the President of the Senate and to the Speaker of the House dated October 10, in which the President, the late President Kennedy, announces his decision to authorize the sale of wheat to the Soviet Union and to Soviet bloc countries.

He enumerates the various good reasons from the standpoint of America's interest as to why he has taken that action and with regard to shipping he says this. It is in the second paragraph of his letter, and I am quoting:

An added feature is the provision that the wheat we sell to the Soviet Union will be carried in available American ships, supplemented by the vessels of other countries as required.

That particular policy decision has since been referred to as we will ship the wheat in American vessels if available.

The CHAIRMAN. Let me interrupt you.
Mr. GILES. Yes, sir.

The CHAIRMAN. In announcing the program in the beginning didn't the President say there would be 100-percent American-flag vessels.

Mr. GILES. No, sir; there was no reference to any percentage at that point. No, sir; at the beginning there was no reference to any percentage, either 100 or 50 percent. It was just that the wheat will be carried in available American vessels, supplemented by the vessels of other countries as required. There was no express reference to percentage.

Following the President's announcement the Department of Commerce issued an export bulletin in which it spelled out the requirements on these exports and that bulletin I believe is No. 883, and which by this time the determination was made, after discussion with representatives of the shipping industry, that not more than 50 percent of American-flag tonnage would likely be available under any circumstances, would be physically available.

The CHAIRMAN. That is 50 percent of the American-flag tonnage, not 50 percent of the proposed cargo?

Mr. GILEs. No; 50 percent of the proposed cargos. We are talking in terms of a total of about 4% million tons of wheat or wheat flour to be shipped to the Soviet bloc countries, a total of 41% million tons. That was what was being discussed, and when you take that and add to it the anticipated requirements under Public Law 480 and other Government programs for the next several months, it was evident that physically there would not be sufficient American tonnage to handle 100 percent of the Soviet bloc shipments and the 50 percent regularly scheduled under Public Law 480 and other programs. The question confronting the administration and the shipping industry, and also a question for the grain exporters, was: Can we arrive at some percentage, which is less than 100 percent, but which is as reasonable and as accurate as we can estimate it, so that the grain exporters can quote the lowest price to the buyer? If the grain exporter has to count potentially on shipping 100 percent of this wheat in American-flag vessels at the rates substantially higher than foreign-flag vessels, then his net price that he is going to quote to the buyer is going to be that much higher. The committee is aware of all of the discussions and the negotiations with Soviet representatives that have been reported in the }. but which I would rather not get into and defer to the State epartment on that. I simply state as a conclusion that it was in America's interests to attempt to arrange this shipping matter so that the exporter could quote the lowest net price to the purchaser. That was made clear. Following our several discussions with shipping industry representatives, much of which was carried on by Under Secretary Roosevelt, who is now out of the country— The CHAIRMAN. Let me interrupt so we can understand it. You say American shipping representatives. r. GILEs. Yes, sir. The CHAIRMAN. Would you put their names in the record. Mr. GILEs. I would say primarily on this would be representatives of the AMA. Mr. Max Harrison, of course, is the president of that roup. Mr. Earl Smith I recall as one of the members of that group involved, along with other officials of that group. We had during that period two or three meetings with representatives of the four shipping associations, which include AMA, AMMI, the CASL group, and the PASSA group. All of those associations were represented and we invited all of them to the overall meetings where we were discussing these matters and trying to o an approach which would be reasonable and which would benefit the shipping industry. Out of all these discussions—this came from some of the industry shipping people—it was concluded and made evident that the only way American shipowners would be able to quote the lowest possible prices to the grain exporters, so they in turn could have a low net cost on the shipping side, was to attempt to set up a program where the larger vessels could participate in the commercial shipments to the Soviet bloc countries, and this particular suggestion did not originate as such with the Department of Commerce. I don't know who it originated with among the shipowner group, but it did come from our discussions principally, I think, with the AMA, where it was suggested that we consider an arrangement where the larger ships could participate in the commercial shipments and the smaller ships would have first call, or at least would be relied on primarily, for the Public Law 480. The next step, Mr. Chairman, was to consider the question of rates. By this time the Commerce Department, the Maritime Administration, was called upon to publish some sort of guideline rates. Between the time of the President’s announcement on October 10 and November 8, and I am referring to November 8 as the time of an announcement by Under Secretary Roosevelt, the Department of Commerce had held back and said, “Well, we will not set any rates. Let's see what the market will do.” Some of the exporters, although they did not have any specific contracts, went on the market and asked for tonnage available, tonnage during the following months, and at what price, and some of the results they got then were quite discouraging. Some of the larger vessels were offered in at prices in excess of the top guidelines that we had published for Public Law 480, in excess of the prices that we had published for the smaller vessels, which the smaller vessels could get along with. Mr. CHAIRMAN. Do you remember what the guideline rates were at this point? Mr. GILEs. Mr. Chairman, you have that before you I believe in that package of material. It is headed “Voyage Charter Rate Guidelines.” The CHAIRMAN. You understand. I want it for the record so someone reading it will see it. Mr. GILEs. Yes, sir; we will have that. The rate quotations the grain exporters initially obtained are understandable in that sort of situation. I think that you would get perhaps those sorts of rate quotations. Shipowners were asked really to give general advice as to what they thought they could do. They really were not talking specific charters and they really could not anticipate at that time what the full development of the market was going to be, but the prices quoted then were also against the background of the Government's announced decision that all of this wheat shipped to the Soviet bloc countries would go in American-flag vessels as available, and it was understood that there would, in effect, be a cargo perference on it. §. the result of our sitting back and not giving any indication of rate folio made very clear to us that if we did that the exporter, so ar as the prices quoted to him from the shipping industry, was not going to be able to compete really within reasonable terms with foreign-flag shipping. The rates would simply be up there. So we were called upon to set some rates, and our only experience, as you know, Mr. Chairman, is with the Public Law 480 program. We looked at what we had done there and we considered the experience that we had had under Public Law 480 and we determined that over the past year or 2 years actual shipments of Public Law 480 cargo had in many instances been handled at rates by American-flag vessels, particularly by the larger vessels, from 20 to 40 percent below our published guidelines. Our published guideline rates of course had been set some years ago at such a level that the smaller vessels, the Liberty vessels, could participate in that program and have a rate of return they could live with. The CHAIRMAN. Were the guideline rates published prior to 1963?

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